Inside Health

Insurers and Drug Makers See Gain in Bush Victory

By ROBERT PEAR

Published: November 5, 2004

Insurance and pharmaceutical executives said Thursday that they were pleased and immensely relieved at the election results. President Bush's victory, they said, guarantees that the new Medicare prescription drug program will be carried out by officials who enthusiastically support it.

By contrast, they said, if John Kerry had won the election, he would have tried to revise and repeal major parts of the law, and the appointment of a new team of federal health officials would have delayed efforts to carry out the complex measure.

Mr. Bush signaled his desire for continuity at a news conference on Thursday. ''I want to make sure that the Medicare reforms that we've put in place remain robust, to help us make sure Medicare is available for generations to come,'' he said.

Ian D. Spatz, a vice president of Merck & Company, the drug maker, said the re-election of Mr. Bush would be ''conducive to successful implementation of the law,'' which offers drug benefits to all 41 million Medicare recipients in 2006.

''Bush administration officials are heavily invested in the law because they supported its passage,'' Mr. Spatz said. ''This is an administration that's looking for the law to succeed, not to prove that it will fail.''

The law relies on private insurers to deliver drug benefits. ''Private plans have confidence that the administration will stick with the new program as long as it takes for it to work,'' Mr. Spatz added.

The election results were seen as a good omen for insurers, especially managed-care companies.

Smith Barney, the stock brokerage unit of Citigroup, predicted higher earnings for Aetna, Humana and PacifiCare as a result of the presidential and Congressional elections.

''Medicare is a profitable new growth driver,'' Smith Barney said Thursday in a research report written by Charles A. Boorady, a securities analyst. By increasing Medicare payments to private plans, it said, the new law will make all three companies ''more profitable.''

''A managed-care organization can receive an average $10,000 per customer per year for each Medicare enrollee they sign on, and marginal profit of about $300 to $400 per member per year,'' Smith Barney said. ''Senator Kerry had threatened to cut reimbursement, whereas President Bush is a strong supporter of Medicare privatization.''

Dr. John W. Rowe, the chairman of Aetna, said he generally agreed with that assessment. The election, Dr. Rowe said, ''does brighten the outlook for us.''

Senator Charles E. Grassley, Republican of Iowa, who was re-elected Tuesday with 70 percent of the vote, said, ''Health savings accounts can be very useful, and we need to make sure they work well.'' Listing his priorities as chairman of the Senate Finance Committee, Mr. Grassley said he would also seek ways to ''lower health costs and improve access'' to care.

Mr. Kerry had denounced the new Medicare law, saying it did more to help drug and insurance companies than the elderly. On the campaign trail, he often said he believed that the government should directly negotiate with drug companies to secure lower prices for Medicare beneficiaries, a practice forbidden under the law. Mr. Bush and Republicans in Congress can ensure that the ban stays in force.

Bradford J. Holmes, vice president of Forrester Research, a technology consulting company in Cambridge, Mass., said: ''The new law will now go into effect unchanged, without the pressure of revisionist desires of the Democrats. A Kerry administration would have put the Medicare drug benefit under the microscope and would have pushed for importation of prescription drugs as a way to expose global price differentials.''

Craig L. Fuller, president of the National Association of Chain Drug Stores, said the election meant that ''we will see an acceleration in the process of carrying out the new Medicare law, issuing rules for the drug benefit and setting standards for electronic prescribing'' of drugs.

Karen M. Ignagni, president of America's Health Insurance Plans, a trade group, said the election results increased the odds for passage of legislation limiting awards in medical malpractice cases.

Mr. Bush said the time for action on this issue had arrived. He noted that ''medical liability reform had been debated and got thwarted a couple of times'' in the Senate.

Republicans will hold 55 of the 100 Senate seats next year, 4 more than they now have. But E. Neil Trautwein, assistant vice president of the National Association of Manufacturers, said, ''Whether our preferred form of medical liability reform, including caps on punitive and noneconomic damages, can pass the Senate is still up in the air.''